UPS Avoids Strike in Multiple States: What's Ahead on the Labor Front?

Avoiding a major labor crisis, at least for the time being, parcel giant United Parcel Service UPS agreed to resolve several outstanding grievances and a local contract dispute. Following the development, a strike at the global air sortation hub in Louisville, KY, and package terminals in six other states has been called off by the Teamsters union, representing thousands of workers at UPS.

Despite the 11th-hour resolution in several states following the strike threat, the relationship, characterized by impatience and irritability, between the Teamsters and UPS has not improved. Teamsters believe that UPS is still violating the union’s National Master Agreement around the country.

The union remains upset with UPS for offering drivers a buyout package to reduce labor costs, not hiring the promised number of full-time employees and allegedly not complying with a commitment to purchase more package vans equipped with air conditioning.

Under Article 18 of the contract, UPS is obligated to deliver at least 28,000 vehicles equipped with air conditioning. According to Teamsters, the company is lagging far behind, having rolled out less than 10% of the required new fleet. Under Article 22, UPS is obligated to create at least 22,500 new full-time jobs, but the figure has yet to be reached by UPS. Teamsters also allege that UPS is violating rules on overtime work.

UPS is in the process of streamlining the delivery network to align with lower parcel volumes, following its decision to trim the business with Amazon AMZN. Earlier in the year, UPS’ management reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to Carol Tome, UPS’s chief executive officer, Amazon was not its most profitable customer.
According to Teamsters’ general president Sean M. O’Brien, “The enforcement of our national contract must now only heat up. We need all members ready to punch back at a moment’s notice.” Investors will no doubt keenly await further updates on this burning labor problem at UPS.

Labor problems are not uncommon at UPS’s rival, FedEx FDX, as well. In June, multiple FedEx pilots picketed in Memphis, expressing frustration over contract negotiations. Pilots seek improvements in retirement benefits, pay, job security and other factors. Negotiations have been going on since 2021. Expressing disgust, the FedEx Master Executive Council of the Air Line Pilots Association, International, recently reached a consensus reflecting loss of confidence in Justin Brownlee’s (senior vice president, flight operations and airline planning) ability to manage air operations. The decision is based on the persistent decline in airline planning and scheduling performance.

UPS’ Price Performance, Valuation & Estimates

Shares of UPS have declined in excess of 31% in a year, underperforming its industry.

From a valuation standpoint, UPS trades at a 12-month forward price-to-earnings ratio of 12.4X, making it expensive compared with industrial levels.

The Zacks Consensus Estimate for UPS’ 2025 and 2026 earnings has been revised downward over the past 30 days.

UPS’ Zacks Rank

UPS currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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